Expanding its operations in South America, state-run ONGC Videsh Ltd (OVL) has signed production sharing contracts for two offshore oil exploration blocks in the northwest coast of Cuba.
OVL, the overseas investment arm of Oil and Natural Gas Corp. (ONGC), already has 30 percent stakes in six Cuban exploration blocks.
The production-sharing contract for the new blocks was signed Sep 9 in Havana by OVL managing director R.S. Butola with the state-owned Cuba Petroleum.
Unlike in the case of the six exploration blocks in which ONGC Videsh farmed in with Spain’s Repsol-YPF last year to take a 30 percent stake, in the new blocks, covering 4,300 sq km the Indian company will be holding the 100 percent stake and would handle the operations alone, a senior company official told IANS.
The Cuban government has the option to take a 20 percent participating interest in the blocks that are in Cuba’s Exclusive Economic Zone.
“We bid for the two blocks through the open acreage system after evaluating the data bought two years back. We had focused on two-three blocks and after negotiating the production-sharing agreement, which took some time, finally signed the contract with the Cuban national oil company,” the official said.
Under the production-sharing contract, OVL has committed to three-stage investment over six years that is expected to see initial investment of around $50 million in seismic data gathering and drilling for exploration, an official said.
Ahead of commencing work, OVL would soon be setting up a branch office in Havana.
“OVL has already made its presence in Cuba’s upstream hydrocarbon sector through participation in six offshore blocks. This contract would give major boost to OVL’s activities in the region”, said R.S. Sharma, chairman of the ONGC Group of Companies, in a statement.
The two blocks awarded to OVL are among the 16 blocks awarded by Cuba Saturday for exploration to as many companies at a time when the US has been voicing concerns over the environmental impact of exploration activities in Cuba’s Gulf waters.
Meanwhile, official sources said OVL and its partners Repsol-YPF and Norway’s Norsk Hydro in the six exploration blocks would be drilling an exploratory well before the yearend.
While Repsol-YPF holds a 40 percent stake in the six blocks and is the operator, Norsk Hydro of Norway holds a 30 percent stake and OVL the remaining 30 percent. Three years ago Repsol found indications of good quality oil in one of the exploratory well drilled.
The two new blocks are just below the other blocks and closest to the northwest coast where heavy crude is pumped from onshore.
OVL currently holds stakes in over two dozen blocks spread across 13 countries including Russia, Sudan, Mayanmar and Vietnam among others.